South Africa

ANALYSIS

A tangled web, ANC edition: The Reserve Bank and ‘quantity easing’ mess reveals a party in deep internal crisis

A tangled web, ANC edition: The Reserve Bank and ‘quantity easing’ mess reveals a party in deep internal crisis

The very public slapping down of Ace Magashule by, among others, Tito Mboweni and Enoch Godongwana is yet another expression of just how comprehensively the ANC is divided. You know things are bad when so many in the party line up to display contempt for the person of the secretary-general, a nigh-impossible feat during Gwede Mantashe’s time.

On Wednesday morning, 5 June 2019, the divisions in the ANC on economic policy, and particularly on the mandate of the Reserve Bank, were back on display. This time they were more public than before, and thus more damaging to the economy and the currency.

The argument was sparked by the ANC’s secretary-general, Ace Magashule, saying that the National Executive Committee lekgotla had resolved to change the mandate of the Reserve Bank with regard to inflation targeting.

Almost all of this has happened before, and the ANC has a long history of public debates about this. But this time, it seems something may have shifted. However, in the longer run, the only way that the mandate can be changed is through the finance minister. And Twitter’s favourite chef is likely to remain unmoved in the face of calls for him to allow the mandate to be changed.

The mandate of the Reserve Bank has been contested within the ANC for more than a decade. When Jacob Zuma came to power at Polokwane there was talk then that the mandate would be changed, and as his power grew, this issue came up again and again. So a comment by a senior official after an NEC lekgotla followed by an angry rebuttal by the party’s Economic Transformation Commission chair, Enoch Godongwana, in Business Day the next morning is nothing new. It is as predictable as the Proteas batting line-up in a World Cup. However, such is the balance of politics within the ANC that something may well be stirring for real, this time.

The starting point for any discussion about ANC policy on the Reserve Bank’s mandate must surely be the latest resolution on this issue by a conference. The ANC’s Nasrec Conference resolution is, in fact, a re-statement of the previous resolution. It says:

On the South African Reserve Bank: Reaffirm the resolution of the 53rd National Conference Resolution on the mandate of the South African Reserve Bank which states: ‘South Africa requires a flexible monetary policy regime, aligned with the objectives of the second phase of transition. Without sacrificing price stability, monetary policy should also take account of other objectives such as employment creation and economic growth.’”

That is the resolution. Full stop.

Then there is the mandate of the Bank’s monetary policy committee as it is now.

Finance Minister Tito Mboweni helpfully tweeted out the current mandate as a reminder on Wednesday night:

The fact that fellow ANC NEC member Tony Yengeni felt the need to respond quickly points out that perhaps not everyone is reading from the same resolutions.

It also begs the question: How much linguistic difference is there really between that ANC resolution and the current situation? Some could argue, not a lot.

Of course, all of this was sparked by the statement by Magashule on Tuesday afternoon, in which he said: “The ANC NEC lekgotla agreed to expand the mandate of the SA Reserve Bank beyond price stability to include growth and employment.”

And this pushed Godongwana into action in a role he has played many times before: His job over the last decade or so has been to hold the line, to ensure that there are no major changes to economic policy from the ANC. It has been a difficult job, all the way through from Julius Malema’s demand for the mines to be nationalised at the 2010 National General Council (NGC) through the land expropriation debate to this current fracas. In the end, he is usually the person who states publicly that things won’t change.

And so it is here.

On Wednesday morning, Godongwana spoke to SAfm and was crystal clear in his view. He said that “from the NGC in 2015 to Nasrec, which closed the debate, no such structure can take such a decision and overturn the decision of the conference. The lekgotla is not a decision-making body. It makes recommendations to the NEC, it is the supreme policy body between conferences.”

In a more interesting vein, he continued: “I don’t recall any of the mandate being discussed. I would have drawn the attention of people to the fact such a decision can’t be taken… because the conference has closed this matter”.

For him, the matter is closed. What Magashule said happened did not happen. End of the debate? …

But of course, it doesn’t end there. It is obvious there is much more politics happening.

Perhaps the questions to ask are: What is the aim of those who want to change the mandate of the Bank? Why are they pushing this so hard, and what is the ultimate motivation for this?

While there are those, such as the SACP and Cosatu, that have consistently pushed for a change, other motives are now being ascribed to Magashule and his supporters.

In political parties, the policy is often a playing field for power plays, as Ferial Haffajee points out: It could look like Magashule is winning the fight against Ramaphosa, and that this is really about political power.

Then there are those, such as Intellidex chairman Stuart Theobald, who believe this is about facilitating corruption.

This claim, when taken together with the various attacks on the Bank since it stepped into the VBS saga, may well grow in strength. Particularly when those implicated in the VBS saga (including the EFF) appear to be leading such a vociferous campaign against Public Enterprises Minister Pravin Gordhan (a campaign which may or may not include the Public Protector, depending on who’s making a determination).

What seems to be missing from all of this is what the debate around the mandate of the Bank should be about, which is obviously creating jobs and growing the economy. The Bank’s governor, Lesetja Kganyago, has said time after time that monetary policy cannot grow an economy, only economic reform can lead to the conditions in which jobs will be created.

And this appears to be missing from the ANC’s official pronouncements on the issue. It does not follow that cutting interest rates dramatically will lead to sustainable growth. Neither, for the record, will “quantity easing”. Instead, as other countries such as Zimbabwe and the Weimar Republic (Germany in the 1930s) have shown, cutting interest rates can simply lead to higher inflation which leads to people not being able to buy bread.

And this may well be where the crux of the issue lies. If this proposal to change the mandate of the Bank was presented as a part of a group of other proposals to radically reform the economy, those making the suggestion might win more legitimacy. Instead, the ANC appears to be saying that the government must cut unemployment from 27% to 14% (which is an oddly specific target in itself) without properly explaining how. And in the absence of that detailed and workable “how”, cynicism will intensify.

And this has always been the ANC’s problem. In large part, South Africa has such a high unemployment rate because the ANC has not been able to agree on what changes there should be to economic policy. And when changes have been agreed on, the contestation has not ended there. In 2012, the ANC’s Mangaung Conference accepted the National Development Plan by acclamation. Delegates didn’t vote, it was simply accepted. How much of that has been implemented?

Then there is the other signal that all of this sends, that the contestation in the ANC is not easing in any way, but in fact, is intensifying at an extreme rate.

In those interim hours between Magashule’s press conference and the contradictions of his statement by Godongwana and Mboweni, ANC spokesperson Pule Mabe had the misfortune to have to explain the ANC’s “decision” on the SABC News channel. He was asked if the recent Twitter arguments between senior ANC leaders were discussed and if action would be taken against those who did this (the ANC’s Ekurhuleni chair, Mzwandile Masina, publicly criticised Ramaphosa’s appointment of Gordhan as public enterprises minister; Tony Yengeni regularly tweets his criticism of Ramaphosa and his appointments).

Mabe said that it was agreed that “comrades should be engaged to desist from such conduct that would undermine the unity of the African National Congress”. And yet, within hours, Mboweni was contradicting Magashule on both Twitter and Facebook, while Godongwana was releasing his own statements directly to media organisations.

All of this is yet another expression of a comprehensively divided party.

More importantly, there are many people in the ANC who are happy to show contempt for the person of the secretary-general. This kind of conduct, this undermining of the office, would have been unthinkable during the time of Gwede Mantashe in that position.

Obviously, much of this has to do with the way that Magashule himself came to power and the sharp divisions at Nasrec that are potentially impossible to resolve. His critics would also say that he has behaved in a factional manner, and has never made an effort to unite the party in any way.

The point of this is that if the ANC is prepared to publicly contradict itself in this way on the economy, knowing the damage this must do to the currency and the economy itself, then is there anything left that is sacrosanct?

On Tuesday GDP figures showed the economy contracted dramatically during the first quarter. And instead of providing direction, leadership and a clear plan, the ANC is once again, at war with itself. DM

More reading:

Das Kapital by Karl Marx

The Wealth of Nations by Adam Smith (also, ironically, free on Google Books)

Gangster State: Unravelling Ace Magashule’s Web of Capture by Pieter-Louis Myburgh

ANC Conference resolutions

Bloomberg’s take

Gallery

Please peer review 3 community comments before your comment can be posted

X

This article is free to read.

Sign up for free or sign in to continue reading.

Unlike our competitors, we don’t force you to pay to read the news but we do need your email address to make your experience better.


Nearly there! Create a password to finish signing up with us:

Please enter your password or get a sign in link if you’ve forgotten

Open Sesame! Thanks for signing up.

We would like our readers to start paying for Daily Maverick...

…but we are not going to force you to. Over 10 million users come to us each month for the news. We have not put it behind a paywall because the truth should not be a luxury.

Instead we ask our readers who can afford to contribute, even a small amount each month, to do so.

If you appreciate it and want to see us keep going then please consider contributing whatever you can.

Support Daily Maverick→
Payment options

Become a Maverick Insider

This could have been a paywall

On another site this would have been a paywall. Maverick Insider keeps our content free for all.

Become an Insider

Every seed of hope will one day sprout.

South African citizens throughout the country are standing up for our human rights. Stay informed, connected and inspired by our weekly FREE Maverick Citizen newsletter.